Sugar struggles as Brazilian currency shows weakness

General Comments: Futures closed lower on a weaker Brazilian real against the U.S. dollar. UNICA showed less production in the second half of June, but this had been expected by the trade. Any expect production to be higher overall due to a record Sugarcane production and better weather now. Sao Paulo was on holiday yesterday to keep action from there on the quiet side. Futures trends remain down overall, and New York prices had an outside day down yesterday, implying further losses are possible this week. There is still a lot of Sugar around, and not only from Brazil. The Indian monsoon is off to a good start and this should help with Sugarcane production in the country. Northern areas are in good shape, but southern areas might be too hot and dry and some stress to the Sugarcane is possible in the short term. In addition, industry sources there told wire services this week that planted area is down by about 5% and that overall production would be lower even with very good weather.

Overnight News: Mostly dry weather is forecast in Brazil. Temperatures should average near to above normal. USDA bought 91,238 tons of Sugar from US producers yesterday.

Chart Trends: Trends in New York are mixed to down with objectives of 1580 October. Support is at 1620, 1600, and 1570 October, and resistance is at 1650, 1665, and 1690 October. Trends in London are mixed to down with objectives of 465.00 and 448.00 October. Support is at 470.00, 469.00, and 466.00 October, and resistance is at 476.00, 480.00, and 485.00 October.

General Comments: Futures were higher on a weaker US Dollar that helped demand ideas and also on ideas that crop conditions are getting worse in Texas. Traders were also getting prepared for the next round of USDA supply and demand estimates today. Parts of the Southeast are getting too much rain and Texas growing areas remain mostly hot and dry. Conditions in Alabama, Mississippi, and Missouri are below average now. Futures held the short term range. It is possible that futures can work lower again as demand has turned soft, but production and weather might be more important in the short term. Weather for Cotton appears good in India, Pakistan, and China.

Overnight News: The Delta should be dry and Southeast will see showers and rains Thursday through the weekend. Temperatures will average near normal. Texas will be mostly dry. Temperatures will average above normal. The USDA spot price is now 82.89 ct/lb. ICE said that certified Cotton stocks are now 0.606 million bales, from 0.612 million yesterday. ICE said that 70 notices were posted today and that total deliveries are now 2,943 contracts. USDA said that net Upland Cotton export sales were 32,700 bales this year and 58,000 bales next year. Net Pima sales were 100 bales this year and 0 bales next year.

Chart Trends: Trends in Cotton are mixed. Support is at 86.00, 85.20, and 84.00 October, with resistance of 87.00, 87.45, and 88.00 October.

About the Author

Jack Scovilleis a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988. Jack writes daily commentaries - Morning Grains and Softs, in both English and Spanish and is regularly quoted around the world by news & wire services including Dow Jones, AP, Bloomberg, and Reuters. You can contact Jack by phone at (312) 264-4322 or by email at jscoville@pricegroup.com. Learn even more on our website at www.pricegroup.com.

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